Brazil's Lula seeks spending waiver for rain-ravaged Southern state where 85 have died

By Leonardo Benassatto, Andre Romani, Lisandra Paraguassu

CANOAS, Brazil (Reuters) -Brazilian President Luiz Inacio Lula da Silva asked Congress on Monday to recognize a state of public calamity for the heavy rains that have killed at least 85 people in the country's southernmost state of Rio Grande do Sul.

More than 130 people are still missing after flooding that has affected more than two-thirds of the nearly 500 cities in the state, leaving about 150,000 people displaced, the state civil defense authority said.

Floods have destroyed roads and bridges in several cities triggering landslides and leaving a path of destruction.

Lula's measure asks Congress to declare a public calamity in the state, which would authorize extra government spending with no need to comply with a spending cap stipulated by fiscal rules approved last year.

Expenses and tax waivers related to the state's recovery will also not be counted in the government's fiscal result under the measure.

"We don't have an estimate yet of what will be necessary," said Planning Minister Simone Tebet.

"Only when the water recedes will we see the immense extent of the damage in the state...," she added.

Flavio Rosa, 72, from the small city of Canoas says it is the first time he has seen destruction of this scale in Rio Grande do Sul caused by the rains, which are a common annual occurrence in this part of Brazil.

"I've seen other floods, but nothing like this," Rosa said.

Weather conditions improved on Monday, but showers are expected to return at lower volumes this week and could pick up again between May 10 and 15, according to local weather forecaster MetSul Meteorologia.

"The hydrological and meteorological scenarios are not at all favorable in the short and medium term," it said. "Despite improvements in parts of the state, some areas will remain under severe conditions for a very long time."

Rio Grande do Sul Governor Eduardo Leite has emphasized that the death toll could still substantially increase as rescue workers gain access to more regions.

Businesses have been severely hit, with meatpacker lobby ABPA saying 10 pork or poultry plants were fully or partially halted.

Oil regulator ANP temporarily lowered mandates for the blend of biofuels into gasoline and diesel in the state as local ethanol and biodiesel supply was affected. Petrobras' Canoas refinery was still supplying fossil fuel, it said.

State capital Porto Alegre's Salgado Filho International Airport, one of Brazil's busiest, had its operations suspended indefinitely, operator Fraport said.

Railway operator Rumo said train circulation in the state was partially interrupted due to the extreme weather and damage to assets is "still being duly measured."

(Reporting by Leonardo Benassatto in Canoas and Andre Romani in Sao Paulo; Writing by Gabriel Araujo and Peter Frontini; editing by Chizu Nomiyama, Richard Chang and Josie Kao)